Tuesday, April 26, 2011
Even in the face of higher crude acquisition costs, the EIA predicts refiners’ margins will be significantly higher this year. Last year, refiners’ margins averaged $0.35 a gallon. This year, the EIA predicts they’ll average $0.53 a gallon, or over 51 percent higher. Diesel margins are expected to average $0.60 a gallon this year versus $0.40 a gallon last year.
Let's get right into these to stocks:
Tesoro Corporation (NYSE:TSO)
Western Refining, Inc. (NYSE:WNR)
Over the past 12 months Western Refining Inc (WNR) shares have traded between $4.01 and its 52-week high of $19.5. Western Refining Inc shares are now trading with a Forward P/E Ratio of 9.89.
I plan to sell short US government bonds sometime in the next few weeks, months. Interest rates all over the world are going to go higher. We have inflation, staggering debt problems and currency problems facing us. So interest rates are going to go higher.
Rogers said the treasury market will collapse when QE2 ends on June 30. Soon enough Rogers says the Fed will return with QE3.
Rogers says he is invested in all agricultural commodities through the Rogers Agricultural Index. Other commodities he likes are natural gas and silver:
I prefer to look at the things that are still depressed. Natural gas is depressed compared to oil, silver is depressed compared to gold. I would rather look at the things within those sectors to see what are the things that are still depressed and see if maybe that is where we should be putting money.
That's right, silver is just getting started:
Silver has certainly gone up a lot in the last 9-10 months. There is no question about that, but remember, silver is still 10% below where it was 31 years ago. I bet you do not know many things that are 10% below where they were 31 years ago.
Silver has been going up but on a historic basis, it is still very depressed. Oil is up a lot in the last year or two, but remember the known reserves of oil are on a decline. People can moan all they want about. The fact is that the price of oil is up, but where is the oil? If somebody finds a lot of oil, prices are going to go much-much higher.
The Vancouver-based company was founded in 2005 by a management team with decades of experience in the mining industry.
With a market cap of $520 million, the stock has traded on the Toronto exchange since 2006 and on the AMEX exchange since 2007.
All indications are that Alexco will turn profitable in the fiscal year that ends in June, which should help green light the stock in many investors' minds.
The company's exploration has thus far been centered on its holdings in the Yukon's Keno Hill Silver District where it began to accumulate land in 2006.
Rated at 40 ounces per ton, Keno Hill is historically one of the richest silver production districts in the world.
Commercial production began at the company's Bellekeno mine on January 1, and the mine appears ready to release its wealth to today's improved, more cost-effective technologies.
The company's production plans indicate that Alexco Resource will deliver 2.8 million ounces of silver in 2011. It projects this will increase to 5 million ounces by 2013, and to 7 to 10 million ounces by 2015.
The Bellekeno mine produces two metals typically found with silver -- lead and zinc. As gold and silver have drawn most of the attention due to rising prices, other less glamorous non-precious metals, including lead and zinc, also have marched higher.
In addition to its silver lode, Alexco projects that it will produce 18 million pounds of lead and 8 million pounds of zinc from the mine this year.
At spot market prices of around $1.10 and $1.25 per pound, respectively, production of those metals should pay for all mining costs.
And therefore, the silver coming up becomes 'free' -- produced at a negative cash cost. While lead and zinc pay the freight, the silver is all profit.
If Alexco Resource reaches 7 million ounces of silver output a year, the company will have a tremendous cash flow.
Interestingly, Alexco Resource also has another mining-related business - restoring mine sites and other brownfields environmental eyesores by returning the land and water to the way they were pre-mining.
So it cleans up after itself, and even cleans up any messes that other less conscientious outfits have left behind.
The company is sitting on $46.1 million in cash, thanks to a refinancing move made in 2010, and it also has no long-term debt on its books.
The Volatility Index "VIX"
Why the VIX is a Good Investment Now
The VIX As Life Insurance for Your Portfolio
How to Play the VIX
Intel and Microsoft Can Grow Despite Huge Size Read more: Intel and Microsoft Can Grow Despite Huge Size : MSFT, INTC
That’s what has happened to Microsoft (MSFT) and Intel (INTC). Yet both companies still have solid, if not always meteoric, earnings growth. And they have instituted healthy dividends, turning themselves virtually into utilities. All this can make them an attractive investment play.
The world’s largest chip maker had a stellar first quarter. Net income soared 29 percent from a year earlier to $3.16 billion from $2.44 billion, beating analysts’ estimates by more than 20 percent. Sales surged 25 percent to $12.8 billion.
The smartphone and tablet craze boosted demand for Intel chips that help power the devices. And while demand for new personal computers is sluggish, demand for upgrades isn't, allowing Intel to benefit from its 80 percent share of the microprocessor market.
The company also is reaping gains from demand for servers that offer cloud computing, which provide all of a computer’s services over the Internet. “The server business exceeded our expectations,” Intel Chief Financial Officer Stacy Smith said in a statement.
Twenty-one of the 30 analysts surveyed by Daily Finance have a buy or outperform rating on Intel.
The world’s largest software producer also beat analysts’ earnings estimates in its latest report. Profit totaled $6.63 billion in the quarter ended Dec. 31, topping estimates by 13 cents. Sales climbed 4.9 percent to $20 billion, also exceeding expectations.
Demand is strong for Windows 7. "Nearly 90 percent of enterprise companies worldwide have already started their formal migrations to Windows 7," Microsoft Chief Financial Officer Peter Klein said on a conference call. Microsoft has sold more than 300 million copies of the product.
The success of Microsoft’s Xbox 360 consoles sent sales in the entertainment-and-devices division soaring by 55 percent.
And the outlook for the future is solid. “We expect revenues to rise 13 percent in fiscal 2011, ending June 30, following 6.9 percent growth in fiscal 2010,” writes Standard & Poor’s analyst Jim Yin.
After briefly dipping into negative territory midmorning as speculators sharply took profits near the $50 psychological level, silver later found its footing again. The metal traded largely flat, steadying at just below $47 after the CME Group raised the maintenance margins of silver futures by 9.2 percent.
Gold prices also recoiled from early gains of nearly 1 percent after touching a seventh successive record high with volatility spiking to its highest since November.
The whipsaw in silver prices amid otherwise thin trading market conditions was a stark reminder of the volatile nature of this year's best-performing major commodity, which has gained about 150 percent since the U.S. Federal Reserve signaled new easing measures last August. Silver has risen for nine straight days, matching a record winning streak from 2008.
"Silver has transformed itself from an inflation hedge to a speculation tool," said Hakan Kaya, commodities portfolio manager at Neuberger Berman, which manages about $190 billion client assets. "At current prices, we find it highly overvalued with no fundamental reasons backing it up."
While often overshadowed by gold, the smaller silver market has handily outpaced the yellow metal's 25 percent gains over the same period. Prices look set to challenge the record $49.48 an ounce from three decades ago when Texan brothers William Hebert and Nelson Bunker Hunt sought to corner the market.
Spot silver was up 1.4 percent at $47.34 an ounce by 3:39 p.m. EDT (1939 GMT), sharply below a session high of $49.31.
Spot gold was at $1,509,60 an ounce, up 0.4 percent, well off an a record high of $1,518.10 set earlier in the session, in tandem with silver's reversal. U.S. June gold futures settled up $5.30 at $1,509.10 an ounce, in a range from $1,502.20 to $1,1519.20.
VOLUME AT RECORD HIGH
U.S. May silver futures jumped as much as over 8 percent to a intraday high of $49.82 an ounce, just about 50 cents off its all-time peak for futures at $50.35 hit on January 18, 1980. May settled up $47.149 an ounce, up $1.09.
U.S. silver volume surged to a record high, topping 300,000 lots, more than doubled gold's turnover, preliminary Reuters data showed.
Despite record futures volume, silver's initial rally was not backed by active trade prior to its sell-off, with markets in Britain, Canada and Australia shut due to the Easter Monday holiday.
Analysts said silver's rally was backed by new source of demand from solar panel manufacturers in addition to traditional strongholds including electronics and photography amid a recovering economy. However, extreme price fluctuations could hurt demand.
"We are constantly researching and developing production methods to minimize key resource inputs, including silver, to drive down the costs of production," said Stuart Wenham, chief technology officer of Suntech Power Holdings Co Ltd, the world's top solar panel maker.
Wenham said that the recent rise of silver prices with increasing volatility highlights the importance of the company's R&D initiatives.
OPTION VOLATILITY SPIKES
COMEX option floor trader Dominic Cognata said that volatility in silver options "went through the moon" ahead of Tuesday's May option expiration and Wednesday's conclusion of the Fed's two-day policy-setting meeting.
Active option trade in iShares Silver Trust, the world's largest silver-backed exchange-traded fund, also suggests some traders maybe betting on a sharp reversal after a huge rally in silver prices.
A key technical indicator, silver's 14-day relative strength index, is warning of a further correction in the silver market after the precious metal got within $1 of its all-time high on Monday and traded at levels not seen in more than 30 years.
On gold, the CBOE gold volatility index, a gauge of bullion investor anxiety, surged to about 17 percent, its biggest one-day gain since November last year.
James Dailey, portfolio manager of the TEAM Asset Strategy Fund said that silver's technical charts are showing signs of exhaustion, with strong volume recorded at its sharply higher open and the subsequent reversal.
In platinum group metals, platinum was up 0.6 percent at $1,821 an ounce, while palladium eased 0.7 percent at $760.47 an ounce.